Question: Assume that the nominal interest rate has reached the zero lower bound (ZLB). A) Discuss how the monetary policy (MP) curve looks like. Explain and

Assume that the nominal interest rate has reached the zero lower bound (ZLB).

A) Discuss how the monetary policy (MP) curve looks like. Explain and show graphs if you can.

B)Discuss how the monetary policy (AD) curve looks like. Explain and show graphs if you can.

C) Assume that there is a positive temporary supply shock. Explain what happens to output and the inflation rate. Use graphs if you can.

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